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Ritchie Bros. Auctioneers (America) Inc. v. Suid

United States District Court, W.D. Washington, Seattle

February 6, 2018

NAEM SUID, et al., Defendants.


          Mary Alice Theiler United States Magistrate Judge


         Defendants Naem Suid (Naem), Mohammad Suid (Mohammad), and Suid Trucking, LLC (Suid Trucking) filed a Motion to Dismiss the Complaint filed by plaintiff Ritchie Bros. Auctioneers (America) Inc. (“Ritchie Bros.”). (Dkt. 14.) Defendants request oral argument and sanctions. Plaintiff opposes the motion. (Dkt. 18.)[1] The Court, finding oral argument unnecessary, herein GRANTS in part and DENIES in part defendants' motion (Dkt. 14) for the reasons set forth below.


         Ritchie Bros. provides auction services for the sale of large equipment. On February 15, 2016, Naem and his son Mohammad participated as bidders in an auction held by Ritchie Bros. in Orlando, Florida. (See Dkt. 1.) Naem and Mohammad each signed a written Bidder Registration Agreement (Agreement(s)) stating:

Bidder, whether acting as principal, agent, officer or director of a company or otherwise, in any capacity whatsoever, and the company he represents, both jointly and severally agree . . . to be responsible for the payment of the purchase price and taxes on all Purchases made using the Bidder Number regardless of whether it is in the Bidder's possession or not[.]

(Id., ¶4.8 and Exs. A-B.) The Agreements state “[a]ny outstanding balance must be paid within seven (7) days of the completion of the auction.” (Id., Exs. A-B.) They provide for the resale of purchased items if the total purchase price is not paid within the prescribed time and payment by the bidders of any outstanding deficiencies following such resale. (Id.) The terms of the Agreements are governed by and interpreted under the laws of the State of Washington. (Id.)

         Purchases at the auction made pursuant to bidder number 743, assigned to Naem, and to bidder number 4784, assigned to Mohammad, were valued at a total of $238, 737.50 and $336, 972.50 respectively. (Id., ¶¶ 4.13-4.14, Exs. A-D.) Neither Naem, nor Mohammad tendered payment for the purchased equipment. On March 25, 2016, Ritchie Bros. sent letters to Naem and Mohammad requesting payment within seven days, and warning them Ritchie Bros. otherwise would resell the purchased equipment and pursue deficiencies owed after resale. (Id., ¶4.18.)

         Again, neither individual tendered payment and, after resale, deficiencies of $53, 342.50 (bidder # 743) and $116, 862.50 (bidder # 4784) remained. (Id., ¶4.19.) On September 29, 2017, Ritchie Bros. filed this suit, alleging breach of contract and action in debt for the principal amount of $170, 205.00. (Id., ¶¶ 5.1-5.11.)

         Plaintiff alleges Naem placed his bids either personally or through Mohammad, and that Mohammad participated in the auction as an agent and on behalf of his company, Suid Trucking, without disclosing that fact when he signed the Agreement and placed bids. (Id., ¶¶4.13-4.16.) Plaintiff alleges Naem's attorney, Stephen Stone, informed Ritchie Bros.' counsel, on July 28, 2017, that Mohammad participated in the auction on behalf of Suid Trucking. (Id., ¶4.22.) Plaintiff avers defendants acted in concert as bidders at the auction and agreed to be responsible, jointly and severally, for the equipment purchased. (Id., ¶¶4.17, 5.2)

         Defendants deny plaintiff's allegations and move to dismiss claims against Suid Trucking for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6), as to all defendants for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1), and as to Naem for insufficient service of process, pursuant to Rule 12(b)(5). Defendants also request Rule 11 sanctions.


         A. Bankruptcy Stay

         In its opposition to the motion to dismiss, Ritchie Bros. advised the Court Mohammad filed for Chapter 7 bankruptcy protection in the United States Bankruptcy Court for the Middle District of Florida on October 10, 2017. See In re Suid, No. 17-06532-KSJ (M.D. Fla.).[2] Given the automatic stay imposed by 11 U.S.C. § 362(a), Ritchie Bros. refrained from addressing the motion to dismiss as related to Mohammad, while opposing the motion as to non-debtor defendants Naem and Suid Trucking in order to preserve its rights in this action. (Dkt. 18.) Counsel for plaintiff attests he informed the bankruptcy trustee and bankruptcy counsel as to this course of action, and was told there would be no opposition. (Dkt. 19.) Ritchie Bros. requests the opportunity to seek relief from the automatic stay in order to oppose the motion to dismiss as to Mohammad should the Court allow Mohammad to proceed with the motion.

         Defendants had not filed a Notice of Bankruptcy Stay or advised the Court of the bankruptcy filing in their motion to dismiss. In their reply, defendants assert the automatic stay does not prevent the dismissal of claims against Naem or Suid Trucking, and maintain this matter should, in any event, be dismissed in its entirety against all defendants. (Dkt. 23-1.)[3]

         Pursuant to 11 U.S.C. § 362(a)(1), a bankruptcy petition operates as an automatic stay, applicable to all entities, of “the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement” of the bankruptcy proceeding, “or to recover a claim against the debtor that arose before” the bankruptcy proceeding commenced. There is no question that, pursuant to § 362(a)(1), the bankruptcy filing stays the continuation of judicial proceedings against Mohammad.

         This Court can, in certain circumstances, dismiss an action against a defendant engaged in bankruptcy proceedings. Dismissal of an action against a debtor is “permissible so long as it is ‘consistent with the purpose of the statute.'” Dean v. Trans World Airlines, Inc., 72 F.3d 754, 755 (9th Cir. 1995) (quoting Indep. Union of Flight Attendants v. Pan Am. World Airways, Inc., 966 F.2d 457, 459 (9th Cir. 1992) (hereinafter “IUFA”)). Section 362(a) serves two broad purposes: (1) it “provides debtors with protection against hungry creditors[, ]” and (2) it “assures creditors that the debtor's other creditors are not racing to various courthouses to pursue independent remedies to drain the debtor's assets[.]” Id. at 755-56.

         Courts have allowed for dismissal of a debtor defendant where there was no “continuation” of an action. For example, dismissal for failure to prosecute did not violate an automatic stay where the court “was not required ‘to consider other issues presented by or related to the underlying case[, ]'” and the dismissal could not harm the debtor defendant, did not intrude on the debtor's “‘breathing space'”, and did not threaten other creditors by giving preference to the plaintiff. O'Donnell v. Vencor, Inc., 466 F.3d 1104, 1110 (9th Cir. 2006) (quoting Dean, 72 F.3d at 756, and IUFA, 966 F.2d at 458-59). Dismissal of a debtor defendant violates a stay “where the decision to dismiss first requires the court to consider other issues presented by or related to the underlying case.” Dean, 72 F.3d at 756. “In other words, thinking about the issues violates the stay.” Id. (dismissal violated automatic stay where it “required the court to decide whether the law-of-the-case precluded finding TWA liable to Dean.”; “By contrast, in IUFA, the motion to dismiss had nothing to do with the issues arising out of IUFA's grievance. It merely asked the court to recognize that IUFA no longer wished to litigate.”)

         The parties in this case have not adequately addressed the impact of the automatic stay, either in relation to the motion currently before the court or to the proceedings as a whole. Defendants simply assert this matter should be dismissed in its entirety. Plaintiff has not yet responded to the motion to dismiss as it relates to Mohammad. Arguably, consideration of some of defendants' arguments in favor of dismissal could require consideration of issues presented by or related to the underlying case against Mohammad.

         Given the inadequacy of the briefing and information as to the automatic stay, the Court herein addresses the motion to dismiss only as to defendants Naem and Suid Trucking, and denies the motion as to defendant Mohammad in light of the automatic stay. For the reasons discussed below, the Court finds the claims against Suid Trucking properly dismissed without prejudice, but no basis for dismissing the claims against Naem. The Court further finds necessary input from the parties as to the impact of the bankruptcy stay on these proceedings subsequent to the ruling on the motion to dismiss. The parties shall provide that input in accordance with the deadline set forth below.

         B. Failure to State a Claim

         In considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, the Court must determine whether the complaint alleges factual allegations stating a claim for relief that is “‘plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). While detailed factual allegations are not necessary, a complaint must offer “more than labels and conclusions” and contain more than a “formulaic recitation of the elements of a cause of action[.]” Twombly, 550 U.S. at 555. Dismissal is appropriate if the complaint fails to state a cognizable legal theory or fails to provide sufficient facts to support a claim. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

         The Court accepts all facts alleged in the complaint as true, and draws all inferences in the light most favorable to the non-moving party. Barker v. Riverside County Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009). The Court is not bound to accept the non-moving party's legal conclusions. Iqbal, 556 U.S. at 678. The ultimate question of whether a plaintiff's allegations have merit “can be ...

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